scholarly journals Price Setting in Online Markets: Basic Facts, International Comparisons, and Cross-Border Integration

2017 ◽  
Vol 107 (1) ◽  
pp. 249-282 ◽  
Author(s):  
Yuriy Gorodnichenko ◽  
Oleksandr Talavera
Keyword(s):  
Exchange Rate ◽  
International Comparisons ◽  
The United States ◽  
Nominal Exchange Rate ◽  
Retail Sector ◽  
Price Setting ◽  
Online Markets ◽  
Basic Facts ◽  
Exchange Rate Shocks ◽  
Pass Through

We document basic facts about prices in online markets in the United States and Canada, which is a rapidly growing segment of the retail sector. Relative to prices in regular stores, prices in online markets are more flexible and exhibit stronger pass-through (60–75 percent) and faster convergence (half-life less than two months) in response to movements of the nominal exchange rate. Multiple margins of adjustment are active in the process of responding to nominal exchange rate shocks. Properties of goods, sellers, and markets are systematically related to pass-through and the speed of price adjustment for international price differentials. (JEL F31, F41, L11, L81)

scholarly journals Price Setting in Online Markets: Basic Facts, International Comparisons, and Cross-border Integration

2014 ◽  
Author(s):  
Yuriy Gorodnichenko ◽  
Oleksandr Talavera
Keyword(s):  
International Comparisons ◽  
Price Setting ◽  
Online Markets ◽  
Cross Border ◽  
Basic Facts

scholarly journals Exchange rate pass-through to inflation in Egypt: a structural VAR approach

2018 ◽  
Vol 3 (2) ◽  
pp. 2-19 ◽  
Author(s):  
Omneia Helmy ◽  
Mona Fayed ◽  
Kholoud Hussien
Keyword(s):  
Exchange Rate ◽  
Price Index ◽  
Structural Var ◽  
Empirical Literature ◽  
Content Type ◽  
The Exchange Rate ◽  
Exchange Rate Shocks ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
The Impact

Purpose The theoretical and empirical literature stipulated that exchange rate shocks do influence the domestic price of imports. Hence, this paper aims to investigate the underlying relationship between the exchange rate and prices known as the exchange rate pass-through. Design/methodology/approach The paper uses a structural vector auto-regression (SVAR) model, drawing on Bernanke (1986) and Sims (1986), to empirically examine and analyze the pass-through of exchange rate fluctuations to domestic prices in Egypt. Findings The empirical results of the monthly data between 2003 and 2015 revealed that the exchange rate pass-through in Egypt is fairly substantial but incomplete and slow in the three price indices [IMP, producer price index and consumer price index (CPI)]. However, the impact is more prominent for consumer prices than for any other price index. This finding could be attributed to the fact that the CPI in Egypt is composed of a relatively large number of subsidized commodities and goods with administered prices as well as the authorities’ behavior in manipulating prices (i.e. export ban). This is expected to weaken the transmission of exchange rate shocks. Practical implications The result has interesting implications for Egypt’s ability to attain an effective inflation targeting regime. Originality/value The study contributes to the literature by assessing the effect of changes in the exchange rate (the Egyptian £ vis-à-vis the US$) on prices using an updated time series from 2003 to 2015. It addresses the limitations of the study of Nafie et al. (2004), which found no strong relationship between the exchange rate and inflation rate in the Egyptian context. One of these limitations was using the CPI, as the only price index.

ONE APPROACH TO RESOLVE THE EXCHANGE RATE PUZZLE: RESULTS USING DATA FROM THE UNITED KINGDOM AND THE UNITED STATES

2018 ◽  
Vol 63 (05) ◽  
pp. 1367-1384
Author(s):  
MOHAMED ARIFF ◽  
ALIREZA ZAREI
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
The United States ◽  
Cash Flows ◽  
Nominal Exchange Rate ◽  
Data Series ◽  
Test Procedures ◽  
Bretton Woods ◽  
Long Run ◽  
Using Data

We approach a significant research topic in international economics by restating the test procedures in a novel manner consistent with monetary theorems with controls using monetary variables and applying an appropriate econometric methodology to re-examine three aspects of exchange rate behavior. (i) Does the inflation (price) factor affect Nominal Exchange Rate (NER)? (ii) Do relative interest rates between countries affect a country’s exchange rate? (iii) Do the price and interest rate effects hold if controls for non-parity factors are embedded in tests? The data series for this study are taken over 55 years covering pre-and-post-Bretton Woods era: a second test was done over the post-Bretton Woods period only using 30 years of data. Also, the traditional factors of parity conditions are extended in this research to take into account recently theorized and tested non-parity factors related to cash flows. The resulting evidence affirms clearly that both the parity factors (prices and interest rates) and the non-parity factors affect exchange rates significantly over the long run, also over the 30-year period. In our view, these findings extend our knowledge of how currency behavior is consistent with parity and non-parity theorems.

Exchange Rate Pass-Through: A Case Study of a Small Open Economy

2007 ◽  
Vol 7 (3) ◽  
pp. 1850112 ◽  
Author(s):  
Olajide Oladipo
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Nominal Exchange Rate ◽  
Production Costs ◽  
Policy Implications ◽  
Relative Price ◽  
The Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Future Path

The exchange rate pass-through for Nigeria imports is estimated by applying an econometric procedure to sectoral data which avoids the pit-falls in previous studies. We use the mark-up approach, which implies setting export prices as a mark-up on production costs. So, the price facing importers is the exchange rate adjusted production costs where mark-up depends on the competitive pressures in the import's market and the nominal exchange rate. Our results indicate incomplete pass-through at varying degrees across sectors, which implies that the foreign exporters passed on only part of the increase in their costs of production to import prices. Also, it reveals that the effort of the Nigerian government in encouraging companies to use local inputs where possible instead of relying on imported intermediate inputs is gradually yielding positive results. Important policy implications that follow from our results of incomplete pass-through to domestic prices could influence CBN forecasts of future path of inflation, a key element in the conduct of monetary policy. Indeed, the successful implementation of monetary policy presupposes that CBN has not only a good understanding of inflation dynamics but is also relatively successful at predicting the future path of inflation. Also, our results imply that the exchange rate policy may be a blunt instrument when used to restore external balance since relative price adjustments will be limited. Furthermore, the incomplete pass-through suggests that exchange rate changes are likely to lead to smaller real effects on the economy through lower changes in both the terms of trade and import volumes and finally, the extent of inflation (deflation) effects of exchange rate depreciation (appreciation) operating through changes in the prices of imported goods will be moderated.

scholarly journals MONETARY TRANSMISSION OF PERSISTENT SHOCK TO THE RISK PREMIUM: THE CASE OF INDONESIA

2011 ◽  
Vol 13 (4) ◽  
pp. 435-468
Author(s):  
Akhis R. Hutabarat
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Risk Premium ◽  
Nominal Exchange Rate ◽  
Monetary Transmission ◽  
Cost Channel ◽  
Long Run ◽  
Pass Through ◽  
Exchange Rate Pass Through

This paper investigates the relative importance of monetary transmission channel to inflation of passing persistent shock to the risk premium. The findings show that nominal exchange rate depreciation, triggered by a more persistent shock to interest risk premium, worsens the state of the economy in the short- and long-run. Such distinctive shocks effect is transmitted through the economy that typifies lack of response of consumer price disinflation to interest rate tightening caused by high real rigidity, strong cost channel of interest rate, strong cost channel of exchange rate pass-through and weak demand-side channel of exchange rate pass-through. This study suggests a proper monetary policy response, which is the smallest interest rate increases within the feasible set of monetary policy responses that the model recommends, to minimize the adverse effects of the shocks.Keywords: Exchange rate, Balance of Payment, Monetary transmission and policy, Dynamic General Equilibrium.JEL Classification: F41; E52; D58

Exchange Rates and Trade Balance Adjustment in Emerging Market Economies

Policy Papers ◽  
2006 ◽  
Vol 2006 (59) ◽  
Author(s):  
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Trade Balance ◽  
Complex Dynamics ◽  
Emerging Market ◽  
Nominal Exchange Rate ◽  
Relative Price ◽  
Relative Prices ◽  
Import And Export ◽  
Pass Through

The paper finds that simple econometric specifications yield surprising rich and complex dynamics -- relative prices respond to the nominal exchange rate and pass-through effects, import and export volumes respond to relative price changes, and the trade balance responds to changes in import and export values.

Do Economic Growth Regimes Impact the Pass-Through of Exchange Rate Shocks to Inflation?

2017 ◽  
pp. 309-321
Author(s):  
Eliphas Ndou ◽  
Nombulelo Gumata
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Exchange Rate Shocks ◽  
Pass Through

China's Exchange Rate and Monetary Policies: Structural and Institutional Constraints and Reform Options

2008 ◽  
Vol 7 (3) ◽  
pp. 31-49 ◽  
Author(s):  
Geng Xiao
Keyword(s):  
Exchange Rate ◽  
The United States ◽  
Nominal Exchange Rate ◽  
Institutional Constraints ◽  
Institutional Barriers ◽  
Monetary Policies ◽  
Surplus Labor ◽  
Regulatory Systems ◽  
Advanced Economies ◽  
The One

This paper argues that declining transaction costs in exporting on the one hand and the structural and institutional barriers to importing and consumption on the other hand are the main causes for China's rising current account surplus. Reforms in China's planning, financial, and regulatory systems are more important than adjustment in nominal exchange rate for balancing China's trade and for China's surplus capital to hire more of its surplus labor. Although structural inflation and currency appreciation are necessary for China's price level to catch up step-by-step with those in the advanced economies, the pace of inflation and appreciation need to be compatible with China's underlying productivity growth. An “inflation first and appreciation second” approach would help China avoid the risks of both deflation and runaway inflation. The United States and China can have win–win results if both focus on the real constraints behind their external imbalances.

scholarly journals Nonlinear pass-through of exchange rate shocks on inflation : a bayesian smooth transition VAR approach

2016 ◽  
Author(s):  
Hernán Rincón-Castro ◽  
Norberto Rodríguez-Niño
Keyword(s):  
Exchange Rate ◽  
Smooth Transition ◽  
Exchange Rate Shocks ◽  
Pass Through

scholarly journals Exchange Rate Shocks and Quality Adjustments

2021 ◽  
pp. 1-45
Author(s):  
Daniel Goetz ◽  
Alexander Rodnyansky
Keyword(s):  
Exchange Rate ◽  
Product Line ◽  
Consumer Expenditure ◽  
High Quality ◽  
Relative Decrease ◽  
Expenditure Switching ◽  
Exchange Rate Shocks ◽  
Pass Through

Abstract Do firms respond to cost shocks by reducing the quality of their products? Using microdata from a large Russian retailer that refreshes its product line twice-yearly, we document that higher quality products are more profitable than lower quality ones, but that the number of high quality products experiences a relative decrease after a large ruble devaluation in 2014. We show that rising firm costs–and not shrinking consumer incomes–explains the reallocation, and rationalize the data with a model that features consumer expenditure switching between high and low qualities. The reallocation to lower quality products reduces average pass-through by 26%.

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